I enjoyed a recent feature in the Financial Times that made me think differently about the meaning and purpose of currency.
Sardinia, a large island in the Mediterranean sea with a population of about 1.6 million, has seen its fair share of economic struggles over the past several decades – most recently, the 2008 financial crisis. Although the eye of the financial crisis' storm wasn't directly over Sardinia, its effects were seen locally. Banks stopped lending, people stopped seeking loans and unable to secure credit, businesses began to fold.
A group of Sardinian natives took matters into their own hands and developed a solution – creating Sardinia's first local currency, the Sardex. "There was no other option," said Giuseppe Littera, one of the currency's co-founders, "but to let companies create their own money." The initiative has turned into a symbol of action over the past six years since its launch, spreading to create a new network of thousands of businesses. Together, they have traded nearly €31.3 million in Sardex this year.
It has some interesting characteristics. The Sardex is not printed, nor is there an algorithm that generates digital coins. Rather, it functions as a system of mutual credit. Each participating firm begins at zero and earns its digital currency as it offers goods or services to others in the network. Companies may go into debt, but only to a certain point – the level determined by what they can offer the other participating firms. There is no interest on Sardex; it functions solely as a means of exchange.
"Money becomes information," explains Sardex co-founder Carlo Mancosu. "But, above all, money (here) is a system of rights and duties. From the monment that I take from a community – as is the case in Sardex – I am in debt towards that community; when I settle that debt with the community, I have given what I have received."
Sardinia isn't the first region to launch its own currency – others have tried, having varying degrees of success – nor will it be the last. The model is already finding its way into Italy and there are reportedly trials under way to create local currencies in Veneto, Piedmont, Emilia Romagna, March, Lazio and Sicily.
It goes to show that regions, businesses and individuals can be innovative in many ways in order to address pressing economic issues.
Image source: Sardex.net
-- Clara Shen